Lithium Royalty, a Toronto-based investor in battery metal producers, is planning to list on the city’s stock exchange to raise capital as it considers opportunities in Quebec for the fast-growing industry.
The initial public offering (IPO) could be valued at $150 million, one of the five largest for the TSX in the past year, according to a report this week in The Globe and Mail citing unnamed banking sources. Lithium Royalty didn’t immediately reply to a phone call and email on Friday seeking comment.
The company filed papers to the TSX this week, but when the IPO would be held, the price and number of shares were unclear. The capital raised is to be invested in North American hard rock lithium projects including in Quebec, the Globe said, citing the offer prospectus.
CEO Ernie Ortiz, who ran battery investments at Tide Point Capital Management in Greenwich, Conn., co-founded the company in 2018 with Blair Levinsky, CEO of Waratah Capital Advisors, and Mark Welling of GMP Securities.
They’ve raised some $130 million and invested in 27 projects in seven countries so far. They include two mines in Australia and four being built in Argentina, Brazil and British Columbia. The rest are in development. The company more than doubled net income to $10.2 million in the first nine months of 2022 compared with $5 million in the same period a year earlier, according to the Globe.
Quebec is being targeted by several miners and developers for hard-rock lithium projects as the province attempts to rival Nevada’s developments, which use the different lithium brine process, and shorten delivery routes to automakers. Last month the federal government approved the James Bay open-pit spodumene lithium project by Galaxy Resources, a part of Allkem (TSX: AKE; ASX: AKE). Sayona Mining (ASX: SYA) is planning to restart its North American Lithium operations within days and Patriot Battery Metals (TSXV: PMET; ASX: PMT; OTCQX: PMETF) is among companies exploring the province.
General Motors said last month it would invest US$650 in Lithium Americas’ (TSX: LAC; NYSE: LAC) US$2 billion Thacker Pass project in Nevada while American Lithium (TSXV: LI; NASDAQ: AMLI) said its Tonopah project northwest of Las Vegas could operate at globally low costs.
Closer to Quebec, automaker Stellantis and LG Energy Solution said nearly a year ago they would invest more than $5 billion to build a battery plant in Windsor, Ont., across the border bridge from the automaker nexus of Detroit.
Lithium Royalty will be vying with other companies that invest in projects to earn a stream of metal production or a cut of revenue such as Wheaton Precious Metals (TSX: WPM; NYSE: WPM), Franco-Nevada (TSX: FNV; NYSE: FNV), Royal Gold (NASDAQ: RGLD) and Osisko Gold Royalties (TSX: OR; NYSE: OR).
“Revenue royalties offer attractive leverage to the underlying commodity’s price and volumes without exposure to capital costs and operating cost inflation or equity dilution,” Lithium Royalty says on its website.
“Royalty and streaming companies benefit from attractive valuations given the scalability of the operations, high margins, and focus on cash flow. Battery demand is set to surge over the next decade and royalties offer compelling risk-adjusted returns.”
While the price of lithium slipped from a high in November on slackening demand in China, the Asian country is expected to increase demand as it removes pandemic restrictions this year. Longer term, analysts predict the demand for lithium will likely outstrip supplies for years as the world transitions to greener energy.
Battery grade lithium carbonate was selling for US$62,925 a tonne on Friday, up from US$60,600 a year ago, according to The Wall St. Journal.
Canada, the United States and other Western countries have begun funding exploration and development of battery metals at an unprecedented rate to challenge China’s dominance in the industry. Some analysts say it controls 80% of the market in the metals needed for a new economy less reliant on fossil fuels.